02488cam a22002777 4500001000700000003000500007005001700012008004100029100002600070245010600096260006600202490004200268500001900310520124800329530006101577538007201638538003601710690007801746690011101824690005701935700002401992710004202016830007702058856003802135856003702173w12802NBER20180524141215.0180524s2006 mau||||fs|||| 000 0 eng d1 aDharmapala, Dhammika.10aWhich Countries Become Tax Havens?h[electronic resource] /cDhammika Dharmapala, James R. Hines Jr.. aCambridge, Mass.bNational Bureau of Economic Researchc2006.1 aNBER working paper seriesvno. w12802 aDecember 2006.3 aThis paper analyzes the factors influencing whether countries become tax havens. Roughly 15 percent of countries are tax havens; as has been widely observed, these countries tend to be small and affluent. This paper documents another robust empirical regularity: better-governed countries are much more likely than others to become tax havens. Using a variety of empirical approaches, and controlling for other relevant factors, governance quality has a statistically significant and quantitatively large impact on the probability of being a tax haven. For a typical country with a population under one million, the likelihood of a becoming a tax haven rises from 24 percent to 63 percent as governance quality improves from the level of Brazil to that of Portugal. The effect of governance on tax haven status persists when the origin of a country's legal system is used as an instrument for its quality of its governance. Low tax rates offer much more powerful inducements to foreign investment in well-governed countries than elsewhere, which may explain why poorly governed countries do not generally attempt to become tax havens -- and suggests that the range of sensible tax policy options is constrained by the quality of governance. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aH25 - Business Taxes and Subsidies2Journal of Economic Literature class. 7aH87 - International Fiscal Issues • International Public Goods2Journal of Economic Literature class. 7aK10 - General2Journal of Economic Literature class.1 aHines, James R, Jr.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w12802.4 uhttp://www.nber.org/papers/w1280241uhttp://dx.doi.org/10.3386/w12802